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USPS countersues Northrop Grumman for contract overruns

By
Jack Moore

Nearly six months ago, Northrop Grumman filed a $179 million lawsuit against the U.S. Postal Service, alleging the agency
delayed and disrupted its work
on a multimillion-dollar contract to create and install high-tech mail sorters.

Now, USPS has countered those claims, alleging the company actually owes it
millions of dollars because the contract ran over schedule, according to documents
obtained by Federal News Radio.

The lawsuits, filed in the U.S. Court of Federal Claims, stem from a $874 million
firm fixed-price contract awarded to Northrop Grumman in 2007 to modernize the
Postal Service's Flat Sequencing Systems (FSS). The contract called for Northrop
Grumman to create a machine-driven system for sorting flat mail, such as large
envelopes and magazines.

Northrop: USPS interference led to delays

Northrop was to deliver all the machines by Oct. 30, 2010, contingent on
successfully passing tests of the systems, according to the original contract. But Northrop didn't finish deploying all of the machines until August 2011, according to the court filings.

However, Northrop has said the delays were caused by USPS essentially interfering
with its performance of the contract.

After the contract was signed, USPS "improperly wrested design control" from the
company, ignored performance specifications the contract had been based on and
"pervasively imposed extra-contractual design requirements," Northrop alleged in
its May 4 court filing.

Rather than a fixed-price contract, the agency treated it as a "full-scale
development, 'build-to-suit' contract," the company said.

When it came time to deliver the machines, USPS ordered extra rounds of testing
that pushed the contract further behind schedule, the company said. Finally, in
July 2010, just months before the original deadline, USPS increased the number of
locations at which the machines would be deployed, from 32 to 47 sites.

USPS stopped paying Northrop in early 2011, according to the company, leaving
about $64.4 million in unpaid invoices.

Northrop is seeking $179 million in damages.

USPS: Northrop responsible for delay

In its Oct. 31 filing, USPS denied most of the company's claims.

The agency said the delays in delivering the sorting machines led to hundreds of
millions of dollars in lost revenue, as the agency had to continue to rely on
manual hand-sorting.

USPS said Northrop was solely responsible for the the failure to meet the delivery
deadline.

In 2010, both parties agreed to modify the contract to extend the deadline for
delivering the machines to July 2011. But the modification specified that Northrop
would be on the hook for any damages to USPS caused by the delay.

The agency said it incurred $393.7 million in damages because the company failed
to deliver the machines on time.

Federal News Radio has requested comment from both Northrop Grumman and the Postal
Service.